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property was tied up, and no one would take LEGISLATIVE INTERFERENCE WITH the title with the litigation pending. The


RATION CONTRACTS. guarantee companies would not issue a guarantee policy, and the owners, some of whom

CHEN England was mainly a pastoral and agriwere lawyers, had to clear their title through a cultural country,

with her trade and compurifying process of twenty years' litigation, merce in their infancy, all sorts of burdensome which was finally attained after all these years restrictions were imposed upon the individual by a of delay, and a large outlay for costs and law- paternal theory of government for the supposed yers' fees, not one dime could be recovered benefit of trade; but in the latter part of the eightfrom the worthless prosecutors. Did you ever

eenth century there was a general awakening to the

falsity of the theories which had permitted these try to get security for costs from any of those impositions. In England, Adam Smith's great work worthless claimants? If you did, I venture to

was followed by many repeals of vicious regulasay you never succeeded. Without exception, | tions and cessation of new restraints. In France, the defendant who asks for security for costs the edict of Louis XVI liberated trade from corfrom a worthless plaintiff, no matter how un- responding restrictions. In America, the Declarafounded his claim, is at once regarded by the tion of Independence set forth the inalienable right court as an avaricious persecutor, and the re

of all men to life, liberty and the pursuit of happi

Our whole commercial history shows that quest as an attempt to throttle litigation and cheat an honest man of his constitutional right tween the old and the new,

our Constitution fixes a great and wide gulf be

between mediæval to law it with you at your own expense.


darkness, which permitted every detail of one's life have known the filing of a bill on a trumped-up to be regulated, the modern freedom of action. claim to practically operate as an injunction But a distinction has always been made between restraining the transfer of valuable real estate private property of individuals and that put to pubfor years, the final decree demonstrating the lic use. The distinctions between public and priclaim to have been unfounded. I know of a bill vate carriers were known of old. The railroad, in pending to-day, which is simply an attempt to fact, existed in the minds of the legislators of both cast a cloud upon the title of a very valuable England and the United States, as improved turndown-town corner, in which perjury already tion for themselves or their goods, in their own or

pikes, all persons should have a right of transportahas been freely indulged in an attempt to ex

the company's carriages, and supplying, if need be, tort a money settlement rather than suffer the their own motive power, upon their compliance delays and uncertainties of a trial, and the in- with certain rules and regulations. And from this definite tying up of the property, as it was early legislation to the present time, it has been thought that a ninety-nine year lease on advan- held that the property of railroad corporations tageous terms was about to be made. An at- wbich have been invested with the right of eminent tempt to do more than place the case upon the domain, and are common carriers of persons or mertrial calendar of a learned chancellor, who but chandise, is property“ devoted to a public use,” infrequently tries cases from his calendar, has and subject to legislative control. met with the usual judicial frown of disap- l in the control of these corporations is a contro

But as to how far State legislation may interfere proval. I think that a system which admits of verted question. There are those who stand up such injustice and oppression needs reforming." boldly for individual liberty to the greatest possi

ble extent consistent with good government, while In re Commissioners of Circuit Court, deci- there are others who also believe in individual libded in the United States Circuit Court, district erty, but declare that our danger lies in too much

rather than in too little freedom. of North Carolina, it was held that while com

The great landmarks of reason, legislation and missioners of the Circuit Court have no fixed adjudication, by which one must be guided in a tenure of office, and the appointing court has discusion of this subject are: power to remove them at pleasure, the exercise 1. The object of the Legislature. of this power should be governed by a sound 2. The inherent powers of the State, especially legal discretion, and if there are charges against the power of public police. a commissioner, full opportunity should be given 3. The constitutional limitations upon the power him for a hearing.

of the State.


controlled or destroyed by any subsequent statute, The object of the Legislature and of civil gov- unless a power for that be reserved to the Legislaernment we assert to be the protection of the gen- ture in the act of incorporation.” eral good and the prosperity, peace and happiness

In the case of Dartmouth College v. Woodward, 3 of the greatest number as against the few, when decided in 1819, the Supreme Court of the United that law respects the rights of the few, according to States announced principles on the subject of prothose principles of justice and right characterized

tection that the charters of private corporations by the comprehensive term, equity.

Any other

were entitled to claim under the clause of the Fedtheory of government must, from the nature of the eral Constitution against impairing the obligation case, be false in principle and false to the interest of contracts. The opinion of this case carried the of the people, in whom, according to the theory of protection of the constitutional provision somewhat American politics, the supreme sovereignty resides in advance of what had been decided in the preced

ing cases, and held that it applied not only to conTHE INHERENT POWERS OF THE STATE.

tracts between individuals and to grants of propThen, there is inherent in the people, represented erty made by the State to individuals or to in their State Legislature, sufficient power and au- corporations, but that the rights and franchises thority to control any and all corporations subject conferred upon private, as distinguished from pubto the jurisdiction of their laws. Especially is this lic, corporations, by the legislative acts under which the case when such regulative legislation looks to their existence was authorized, and a right to exerthe correction of abuses of such corporate franchises cise the functions conferred upon them by the statas exist by authority of the laws of the State. The ute were, when accepted by the corporation, conpresumption of railroads that they are beyond the tracts which the State could not impair. reach of the Legislature, would prove that the It became obvious at once that the effect of this States can divest themselves of sovereignty, a decision was to make it impossible for a legislative proposition which, if allowed, would reduce gov- body to amend or repeal any prior rights conferred ernment to an absurdity.

upon a corporation without the consent of the corLIMITATION OF STATE POWER.

porate body. Mr. Justice Story, in his concurring

opinion, however, suggested that, when a LegislaThe States, under our system of government, are said to be sovereign, to have sovereign rights rest- provision in the statute reserving to the Legislature

ture was enacting a charter for a corporation, a ing in the people; and this is true, except as they the right to amend or repeal it, must be held to be have parted with their sovereignty as evidenced by

a part of the contract itself, and the subsequent exthe Constitution of the United States or by their

ercise of the right would be in accordance with the own State Constitutions.

contract, and could not, therefore, impair its obliIf the question of control or regulation of corpo

gation. rations is not by implication or by express probibi

In order to avoid the consequences laid down in tion of the Constitution of the State or Federal government, excluded from the inherent powers of availed themselves of Judge Story's suggestion. In

the Dartmouth College case, many States have the State the right to control a railroad corporation Massachusetts all acts of incorporation passed since is a power of its prerogative. To each State Con

March 11, 1831, are, by statute law of the State, stitution, therefore, subject to the provisions of the Federal Constitution, the inquirer must go in order subject to amendment, alteration or repeal, at the to determine the extent of the legislative power of pleasure of the Legislature. Mr. Justice Gray, in control or regulation.

delivering the opinion of the court in Commissioner It is my purpose in this inquiry to discuss but in Inland Fisheries v. Holyoke Water Power Co.,' a one question regarding this control—that of the ex

case arising in that State, says:

"* Railroad corpotent of the legislative authority to interfere with the rations may be compelled, by general or special freedom of contract by these corporations.

laws, to make changes in the levee, grade the sur-'

face of the road bed, erect new structures at crossCONTRACT WITH THE STATE.

ings of other railroads, or of highways or stations at First, let us consider the contract of a railroad particular places, in a manner, and to be enforced corporation with the State to which it owes its ex. by forms of process, different from those provided istence. As early as 1806 the Supreme Court of for or contemplated by the original charter or the Massachusetts made the declaration that the rights legally vested in all corporations cannot be · Wales v. Stetson, 2 Mass. 143.

3 Dartmouth College v. Woodward, 4 Wheat. 518. Thorpe v. Rutland & Burlington R. Co., 37 Vt. Com. of Inland Fisheries v. Holyoke Water 142.

Power Co., 104 Mass. 451.

general laws in force when that charter was the carriage of passengers and freight, and, in subgranted.” And in the Sinking Fund Cases the stance, to make all necessary contracts in conductquestion was whether Congress had the constituing and managing their business. And it cannot tional right or power to enact a law compelling the be said that the Legislature can, by way of amendUnion Pacific Railroad Companies to set aside a ment, fix or limit this right so as to operate unportion of their current earnings as a sinking fund justly to the corporation. An amendment to that for the purpose of meeting a very large indebted-extent would violate the Constitution, which, while ness secured by mortgage upon the roads, and pay- it grants the right to amend them when, in the able at a future day. The majority of the court opinion of the Legislature, the charter is injurious held that the legislation was valid as an exercise of to the citizens, it limits the rights to do so to the general legislative powers of the government, amendments that are just to the corporators. But and also because the right to alter or amend the what are just and what are unjust to such corpora charters of the companies had been expressly re- tors is a question upon which the courts widely difserved to Congress.

fer. Thus, it is seen, that although the Dartmouth

The first section of the Fourteenth Amendment College case has not been expressly overruled, its to the United States Constitution provides: “No doctrine has been greatly weakened. The courts State shall make or enferce any law which shall have evidently labored to overthrow its effects, and abridge the privileges or immunities of citizens of in my opinion, justly. There is good reason, I the United States; nor shall any State deprive any think, for saying that, although right of amend person of life, liberty or property without due proment or repeal be not reserved in the charter, the cess of law, nor deny to any person within its jurisLegislature should have such right of appeal or diction the equal protection of the laws." amendment notwithstanding the omission. If not,

The rights to acquire and possess property necesit seems that corporations have a vested right in sarily include the right to contract, for it is the any and all advantages they may obtain by omis- principal mode of acquisition, and is the only way sions on the part of the Legislature. But this right by which a person can rightly acquire it by his own they cannot have. Can the Legislature, by a mere

exertion. Of all the “rights of persons" it is the omission on its part, so bind up legislation as to most essential to humau happiness. disable it or its successor from correcting abuses of

But the right to contract is not uniimited. The corporate franchises? The Legislature could not, conflicting interests of individuals make this imif it were to try, divest itself of the right and duty possible. Rights in conflict with each other cannot to pass laws regulating and controlling the rights be unlimited. Duties to persons, to society, the of individuals, so that in the use and enjoyment of public and the government are imposed upon every their own they shall not injure that of others. If, individual. To conserve and enforce these rights therefore, in the judgment of the law-making de- and duties, the government can impose such repartment of the goverment, the public good will be strictions upon the actions of the individual as may subserved by statute regulating or controlling cor

be appropriate for that purpose. It is upon these porations, when such regulations will not conflict principles that the Legislature can control, to some with the Constitution of the Federal government or

extent the rights of a railroad corporation to conof the State Constitutions, such regulations must be

tract in reference to its property, which is said to sustained by the courts as the law of the land.

be “devoted to a public use." By devoting its CONTRACTS WITH INDIVIDUALS.

property to a use in which the public has an interLet us look now to its contract rights with indi-est, it, in effect, grants to the public an interest in viduals. There are always two controlling consid- the use, and subjects itself to the control of the erations in the granting by the State of corporate Legislature, for the common good, to the extent of franchises, and of the acceptance of such franchises the interest it has thus created. by the corporators. First. The public good is to be Upon this principle, it has been held that the considered the leading and controlling motive with Legislature can fix the maximum of charges for the the Legislature, for the public good is what the carriage of freight and passengers. If otherwise, Legislatures are instituted for by the people. Sec- the corporations of the country could levy such exond. The benefit of the individuals composing such orbitant rates as to tend to the stagnation of busicorporations. This privilege, given to the corpora- ness and travel, and thereby cripple the prosperity tion, gives to it the right to contract with individ- of the State. But this regulation must be reasonuals privately, to engage employes, and to contract with them in regard to their wages, to fix rates for

? Chicago, Burlington & Quincy R. Co. v. Iowa,

94 U. S. 155; Peik v. Chicago & Northwestern R. Sinking Fund Cases, 99 U. S. 706.

Co., id. 180.

able. It is not to be inferred that this power of of the great dangers, and even the destruction of limitation or regulation is itself without limit. Un- | life and property which might result from the atder pretense of regulating fares or freights the State tempt of men, who have become enfeebled by procannot require a railroad corporation to carry pas-longed and exhausting effort, to control engines sengers without reward; neither can it do that and cars when in motion, it seems reasonable to which in law amounts to a taking of private prop-claim that the passing of such an act is within the erty for public use without compensation or with province of the Legislature. out due process of law.!

Another limitation to the right to contract by Whether it is for the courts or for the Legislature railroad corporations is that of their being unable to decide upon the reasonableness of certain acts is by contract to limit their liability for negligence. somewhat doubtful. In the case of Chicago, etc., By the common law of both England and America, R. Co. v. Minnesota, it was held that the Legisla- the common carrier was an insurer for the safety of ture's power to control does not empower a commis- all goods placed in its hands for transportation; sion established by the Legislature to fix rates fin- the fundamental principle upon which this law was ally, without opportunity for a judicial hearing on based being to secure the utmost care and diligence the question of their reasonableness, which, in ef

in the performance of its ties. But the later fect, makes the question one for the court, and not American rule is that the common carrier may by for the Legislature. This, in my opinion, is the special contract with the shipper exempt itself from better view, because if otherwise, it would be giv- responsibility for losses happening from accident ing to the Legislature the authority of deciding the and from dangers that no buman skill or diligence constitutionality of their own acts, a right clearly

can guard against. This, however, is as far as the beyond its power.

rule goes, and it does not allow the carrier to secure It is this same principle from which comes the absolute exemption from liability. power of the Legislature to regulate millers, bakers, This rule is followed in the United States and in hackmen, ferriers, wharfingers, ior keepers and the a majority of the State courts; • but the New York like, “and in so doing fix a maximum of charge to courts ignore this rule, and hold that a common be made for services rendered, accommodations fur-carrier may, by an express contract with the shippished and articles sold." 3

per, exempt itself from liability for loss or damage In all of these cases the legislation is based upon occasioned by the negligence of its servants. some reasonable condition, and not on the absolute The New York rule appears to me the more feasiright to control. It is obvious that the right to con-ble; it is only by express contract with the shipper tract cannot be limited by arbitrary legislation that the company can thus exempt itself, and if the which rests upon no reason on which it can be de- slipper does not wish to make such a contract, the fended. The question as to whether the regulation company is bound to carry the property under the is just or unjust to the corporation depends upon full common-carrier liability. As long as the shipthe question whether or not the limitation or re- per can insist that the carrier sbull carry his propstriction upon its right to contract, is reasonable. erty under the common-carrier responsibility, I can In other words, the corporation should always be see no reason why he may not voluntarily enter into allowed the privilege of making reasonable con- a contract founded upon a sufficient consideration tracts for the purpose of carrying out the object of exempting the carrier from all responsibility for any its incorporation.

degree of negligence. But if the results of the contract of a railroad cor- A most interesting case upon this question of the poration interfere with the interests of the public freedom of contract of railroad corporations is the at large and with the police power of the State, “ Mileage Case,” recently decided by the Supreme then the Legislature may intervene. It was upon Court of Massachusetts, wherein the court disthis principle that the legislative act in New York missed an information brought by the attorneywhich declares that no railroad shall permit or re- general against the Old Colony Railroad Company quire trainmen who have worked twenty-four hours to compel it to sell mileage tickets to all who apto again go on duty until they have had at least ply for them, and to redeem all such tickets preeight hours' rest, was held constitutional. In view sented by any other railroad corporation.



· Stone v. Farmers' Loan & Trust Co., 116 U. S. 307.

Chicago, etc., R. Co. v. Minnesota, 134 U. S. 418. 3 Munn v. Illinois, 94 U. S. 113; Budd v. New York, 143 id, 517.

People v. Phyfe, 32 N. E. Rep. N. Y.) 978.

Liverpool & G. W. Co. v. Phenix Ins. Co., 129 U. S. 397; Railroad Co. v. Lockwood, 17 Wall. 357.

Cragin v. N. Y. C. R. Co., 51 N. Y. 61; Pearsall v. W. U. Tel. Co., 124 N. Y. 268.

* Attorney-General v. Old Colony R. Co., 160 Mass. 62.

" and


By statute of 1892, chapter 389, it was the duty presented for use on another railroad be unable to reof a railroad company to issue mileage tickets, deem them. This, in effect, is the taking of propwhich must be accepted as fare by all other rail-erty which is consumed in the use, with only a right road companies in the State; and, conversely, it of action as compensation, with the risk of never was the duty of all railroad companies to accept obtaining satisfaction; and it appears to me a very mileage books issued by all other railroads.

inadequate security. The grounds upon which the majority of the The railroad is “devoted to a public use,” court hold the statute unconstitutional are, first, the Legislature has power to make reasonable acts that it seeks to compel the transportation of pas- regarding the companies' dealings with the public; sengers by one railroad on the credit of another, to but is it reasonable to say that this extends into the which money for the payment of the fare has been internal arrangements of different companies as beadvanced by the purchaser of a mileage ticket;tween themselves, simply because it will be the and, secondly, that a mileage ticket is to be more convenient for a small part of the public? cepted and received for fare and passage " upon If this is not true, it is as reasonable to say that other railroads, “under like conditions as upon statutes to be extended, not only to the internal arthe line or lines of the corporation issuing rangements of railroad corporations, but all the corsuch ticket.” Thus, requiring one railroad com- porations of the State could be thus controlled and pany to transport a passenger on the credit of an- made to accept paper of third parties for the payother, and authorizing one railroad company to de- ment of their goods. This would, if allowed, not termine the conditions on which another company only be unjust to the corporators, but it would inmust carry passengers.

jure the trade and industry of the country, and be To this opinion there were two dissenting judges thus detrimental to both producer and consumer - Judge Knowlton, who writes the dissenting alike. opinion, and in which Judge Holmes concurs. The The second argument upon which the question questions involved in the arguments of the learned is made to turn is, to my mind, a very strong one, judges are very near the dividing line, and to dis- and sufficient alone to decide the case. The inquiry tinguish whether the legislative interference is valid is this: Can a State Legislature authorize one railor not is, to say the least, difficult.

road to determine the conditions on which another The first question which we have is: Can a State railroad must carry passengers? Legislature require one railrond to carry passengers This is, in effect, allowing one railroad the auon the credit of another railroad? This I would thority of making the contracts of another, which answer in the negative, because it seems to me an is clearly unjust. In my opinion, it is legally iminterference with the rights of a railroad corpora- | possible to legislate a contract into existence. The tion to make reasonable and proper contracts in founders of this government incorporated into the carrying on their business, and so interferes with Federal Constitution a provision that no State their right of property.

should pass any law impairing the obligation of At common law a common carrier of passengers contracts. Had they a full conception of the probcould demand prepayment of the fare before he lems which have arisen since, they would have uncould be compelled to receive and transport passen-doubtedly added to that constitutional limitation a gers. The fare, we have seen, must be reasonable; further provision that no State should pass a law if it is reasonable, and as the carrier can have no which created a contract that had not been entered lien upon

the passenger to secure the payment of into. But, be that as it may, if it is a part of the the fare, it is no more than just that the company duty of a common carrier to carry goods or passenbe allowed to collect the fare in advance, and not gers, for whose carriage he has not been paid, unbe obliged to trust to the credit of the passenger or

less he has specifically waived such payment, then of some other person.

the law can be upheld as a proper regulation of the In the statute in question there was no fund pro- duty of a carrier. But before any of the liabilities vided for the redemption of the ticket, and no tan- of a common carrier attach, the duty of the specific gible property on which there was a lien. It is a

case must be imposed upon him by compliance with known and conceded fact that some of the railroads the law which applies to this peculiar business. of the State are not on the best financial basis, and The first requisite of this is, that the price which is as the statute did not prohibit a railroad from sell- either agreed upon or that which is a reasonable price ing the mileage books for less than $20 each, demanded by the carrier shall be paid. Until that although it must redeem them at that price, there is done, the legal duties of the carrier do not arise, is no reason for not believing that a railroad in low and no amount of legislation can impose upon the financial standing would resort to enormous sales of carrier any of his duties or liabilities. It is the such tickets as a mode of raising money, and when first principle of contract that there must be assent

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